Employees vs. Independent Contractors

Matt Johnson
December 29, 2013
COLUMN : Legal

As you potentially look to expand your staff in response to improving market conditions, it’s time for some quick reminders about the risks associated with hiring and training new employees, and using independent contractors.

Skilled Employees

Proper fenestration installation requires employees who are the right fit for your company. When it’s time to bring someone on board, don’t forget:

  • Be specific when identifying job requirements. Detailed job descriptions should include all essential job functions, as well as the physical and mental conditioning the position requires. Setting performance expectations up front can limit later employment troubles.
  • As a general matter, equally evaluating applicant attitudes and aptitudes for the job’s requirements is acceptable. Problems tend to arise when questions or hiring decisions stretch into things not related to the job; for example, gender, race, criminal past or age.
  • Update your personnel documents—all of them. Begin by looking at application forms and making sure they don’t ask for information or include questions that are no longer permissible. Also, make sure references, background checks and other pre-hiring items are up-to-date and comply with current privacy disclosure requirements. Look to your state’s Employment Department for current, accurate information.
  • Comply with the I-9. A favorite of the Department of Homeland Security, the I-9 is the Employment Eligibility form. Be sure that the paperwork you are reviewing to attest to citizenship is current and meets the requirements. Also remember, the I-9 must be filled out on the first day of a new hire’s employment. Don’t delay, and don’t lose the form.
  • Get your healthcare notices ready. The employer mandate of the Affordable Healthcare Act may have been pushed back to 2015, but there are a host of mandatory employer notices depending on how/whether your company provides healthcare coverage. Disclosures related to Healthcare Exchanges, Summaries of Benefits and Coverage, and minimum-coverage disclosures are now employers’ responsibilities for existing and new employees.
  • Don’t forget the new W-2 requirements for all employees. Certain employers must disclose the benefits of healthcare coverage on the employee’s W-2. It is not necessarily taxable income, but it must be disclosed. Know if you have to comply.

Training

Training new and returning employees in new methods and materials can save a lot of time and money in the long term, and result in quality work and protection against claims.

On-the-job training is one of the best ways to gain experience; however, worker’s compensation laws in many states hold employers responsible for any injuries new employees incur during training related to employment. Make sure supervisors and trainers provide proper warnings about materials and work methods. Proper training in, and use of, safety equipment is essential.

Do not assume all experienced installers have proper safe-job practices. Train all workers, regardless of experience.

Document your training: both on-the-job and employment practices training. Good hiring practices demand that employees be trained in safe and harassment-free workplaces. Document your policies and training materials to avoid uncertainty about your training methods, materials and recipients.

Independent Contractors

Whether you currently use―or are looking to use―independent contractors, remember that these team members are not employees and should not be treated like employees.

Independent contractors must be truly independent. The hallmark of an independent contractor is that it is brought on to accomplish a goal, but the means by which it achieves that goal is at its own discretion. Controlling the means, methods, and manner of how a supposedly independent contractor performs its work can shift its status away from contractor, toward employee. And if the IRS reviews the situation and believes the contractor was an employee, the tax and penalty implications for the employer can be severe.

Any trade you retain should be insured and licensed. Require proof of current licensing, and establish worker’s compensation policies for the contractor to help avoid later efforts to tie its work to you directly.

Do not directly pay employees of your independent contractor. Keep the separation between the companies. Hiring an independent contractor is a job resource, and it should be treated like any other vendor. Require independent contractors to invoice you for their work in accordance with your agreement, preferably in a written contract. Do not reimburse them for materials or time apart from an invoice that complies with your agreement.

The author is a member of The Gary Law Group. Write him at matt@prgarylaw.com.